Code of Ethics For Auctions Announced

The first-ever code of ethics for the Thoroughbred auction industry was introduced Dec. 16 during a press conference at Keeneland.

Four months in the making, the measures are the work of the Sales Integrity Task Force chaired by W. Cothran "Cot" Campbell of Dogwood Stables, and were inspired by the initial efforts of Padua Stables' Satish Sanan.

The task force was put together by the Thoroughbred Owners and Breeders Association.

The code of ethics covers areas such as dual agency, veterinary practices, and a suggested agent/buyer disclosure agreement. It does not require disclosure of the owner of a horse at the time of sale or purchase but does require a veterinarian to disclose if he owns part of a horse whose radiographs he is being asked to examine in a sale repository.

"Our mission in all of this was to come up with a code that would make the auction scene as buyer friendly as possible ... to create a road map for the new buyer and let him know what he should expect and what is not acceptable," Campbell said. "We have weighed the pros and cons and come at the subject from every angle to arrive at a code that we think is workable, practical, and that will provide a more level playing field for the participants. It certainly is one that will have to be tweaked and revised as we go along."

Said Nick Nicholson, the president of Keeneland and a task force member: "We are not here today as a task force to make a final declaration of victory. This is a journey that we are on, and this is a big step in that journey, but nonetheless, it's just one step."

Nowhere in the code of ethics are penalties discussed for the violation of any section of the guidelines. Addressing that issue, Campbell said: "Where are the teeth? That's an expression that we hear over and over. But we are an industry that is ill-suited to any teeth from a central power. So what we have attempted to do in the way of teeth is to one, shine the spotlight on a practice (such as dual agency) that exists; two, to facilitate legal action and legal recourse; and three, to educate the new buyers. We think this will scare or slow down the crooked agent and greatly diminish the irregularities that do exist. Larceny does exist in our game and every other game, although no more in this game than any other. What this (code) will do will not stamp it out. It will never stamp it out. But we think we are going to diminish it, and that is an excellent starting point, we think."

Sanan, who founded the Alliance for Industry Reform (AIR), expressed satisfaction with the task force's results, but said there was more work to be done.

"When I started this initiative (for auction reform) back in June, I never expected to achieve the kind of success we have," he said. "I was very apprehensive, to be very candid, and I didn't think we would make the progress that we have. We have achieved well over 80 to 90 percent of the objectives that we had defined as members of AIR and also that I had in mind. I think peer pressure itself (as a result of the code) is going to ensure that most of these bad practices are eradicated. But there are a few issues that I think will need to be addressed over the next six to nine months. The only real concern that I have is on the disclosure side. We have debated the right to privacy in committee, and I respect it from a personal perspective and a lot of others. But I think we need to make sure that privacy is not used as a sort of veil behind which some of these practices will continue."

Among the items in the code of ethics:

- Veterinary procedures deemed to "improve the conformation of horses and thus enhance their opportunity to remain sound" are acceptable but must be disclosed. This includes invasive joint surgeries and other surgeries "designed to affect permanent" conformation changes, such as transphyeal bridges and periosteal transsections, manipulations, and elevations.

- Veterinary practices prohibited and deemed unacceptable are "temporary alterations" which may mask a horse's conformation, such as shock wave therapy and acupuncture and/or electro-stimulation with the intent to alter laryngeal function. These practices are not permissible "after a horse has arrived at the sale grounds."

The injection of an internal blister or any other means of temporarily altering conformation is "prohibited any time, regardless of the animal's location, within 90 days of sale."If proof is provided within 14 days of a sale that such a practice has happened, the code considers it "to be just cause for the buyer to turn back the horse and expect reimbursement of the sale price."

- The code mentions that an appended form will be provided by sale companies to consignors to provide information on performed procedures on sale horses, and consignors are "asked" to include the information in repositories. The form is voluntary for foals of 2004 but will be mandatory for foals of 2005 and later.

- The code asks veterinarians to sign a dual agency agreement that reads: "I agree to fully disclose my ownership in any horse that I am asked to examine or render an opinion on, to the client or his agent for whom I am employed."

- The code of ethics states the "supplying of ownership information is not held to be a requirement." Thus who owns or buys a horse will remain as clouded as it has been in the past. It does require disclosure of ownership interest in a horse held by a sale company official. A change of ownership in a horse once it reaches the sale grounds "must" be announced from the auction stand. However, this is only if the sale company is informed of the ownership change.

- The code suggests a written agreement be made between an agent and buyer, but does not require such a document. On the subject of dual agency, the code states: "dual agency (without disclosure to all parties) is inherently fraudulent. No agent/trainer should ask for a commission from a consignor, nor should a consignor pay a commission." However, like the entire code, there is no penalty for not adhering to the dual agency question.

The task force was formed after Sanan, owner/breeder and leading buyer at sales, questioned many practices at auctions and formed an organization called the Alliance for Industry Reform (AIR). Sanan is a member of the task force.

Campbell will step down from the task force on Jan. 15, 2005, and a three-member monitoring committee will be charged with evaluating the progress at auctions and revising the procedures as needed. Those members are Reynolds Bell Jr. of Reynolds Bell Bloodstock, Sanan, and Fred Seitz of Brookdale Farm.